1985-1987: Review

As history demonstrates, the issues of education funding and general tax policy have always been closely intertwined.  It is the circumstances that surround the dual issues that have often served as the catalyst for a resolution between them.  The catalyst in the mid-1960s was a constitutional crisis that left the state without any substantial financial means to operate.  The crisis not only produced the most wide sweeping changes in taxation in the history of the State of Nebraska, but also ultimately produced a new school finance formula.

In 1967 Senator Warner introduced LB 448, which created the School Foundation and Equalization Act.  The 1967 school finance formula had three basic components.  The first was to provide state aid to schools on the basis of average daily attendance during the previous year.  This became known as the foundation element of the formula.  The second component, the equalization part, was the creation of a distribution formula to equalize aid in relation to the wealth of the school district.  The third component provided incentive aid to school districts that offered summer school programs and/or employed teachers with advanced degrees.

The bulk of the funding under the new formula was used for foundation aid with the remaining available appropriations used for equalization aid and incentive aid.  But it became painfully clear as the decades went by that the school finance formula was simply under-funded.  As would be documented in 1990, the formula produced inequities in educational opportunities and inequities in tax burden.

In 1985, the Legislature committed itself to a bold step concerning school organization and education funding.  LB 662 (1985) would have caused the merger of all Class I (elementary only) districts and would have raised the state sales tax rate by 1% in order to dedicate more funding for public schools.  LB 662 was then and is still today one of the most controversial education battles of modern Nebraska history.  The issue was so hotly contested that it helped to shape the outcome of the 1986 gubernatorial election.  Ultimately, the people would have the final word with regard to LB 662 when voters at the 1986 General Election voted against retention of the law.

Interestingly, one of the less noted provisions of LB 662 was the creation of a special Education and Taxation Advisory Committee to study the existing school finance system and to propose alternatives for the Legislature's consideration.  This committee, along with all other provisions of LB 662, was eliminated by virtue of the vote on Referendum 400 (1986).  Nevertheless, it appeared that the Legislature was willing to look at alternatives for school funding and it was only a matter of time before another such study committee would be formed.